Back in 1956, an engineer and a mathematician, William Fair and Earl Isaac, pooled $800 to start a company. Their idea: a score to handicap whether a borrower would repay a loan.

It was all done with pen and paper. Income, gender, and occupation produced numbers that amounted to a prediction about a person’s behavior. By the 1980s the three-digit scores were calculated on computers and instead took account of a person’s actual credit history. Today, Fair Isaac Corp., or FICO, generates about 10 billion credit scores annually, calculating 50 times a year for many Americans.

This machinery hums in the background of our financial lives, so it’s easy to forget that the choice of whether to lend used to be made by a bank manager who knew a man by his handshake. Fair and Isaac understood that all this could change, and that their company didn’t merely sell numbers. “We sell a radically different way of making decisions that flies in the face of tradition,” Fair once said.

This anecdote suggests a way of understanding the era of “big data”—terabytes of information from sensors or social networks, new computer architectures, and clever software. But even supercharged data needs a job to do, and that job is always about a decision.

10 billion
Credit scores generated each year

In this business report, MIT Technology Review explores a big question: how are data and the analytical tools to manipulate it changing decision making today? On Nasdaq, trading bots exchange a billion shares a day. Online, advertisers bid on hundreds of thousands of keywords a minute, in deals greased by heuristic solutions and optimization models rather than two-martini lunches. The number of variables and the speed and volume of transactions are just too much for human decision makers.

When there’s a person in the loop, technology takes a softer approach (see “Software That Augments Human Thinking”). Think of recommendation engines on the Web that suggest products to buy or friends to catch up with. This works because Internet companies maintain statistical models of each of us, our likes and habits, and use them to decide what we see. In this report, we check in with LinkedIn, which maintains the world’s largest database of résumés—more than 200 million of them. One of its newest offerings is University Pages, which crunches résumé data to offer students predictions about where they’ll end up working depending on what college they go to (see “LinkedIn Offers College Choices by the Numbers”).

These smart systems, and their impact, are prosaic next to what’s planned. Take IBM. The company is pouring $1 billion into its Watson computer system, the one that answered questions correctly on the game show Jeopardy! IBM now imagines computers that can carry on intelligent phone calls with customers, or provide expert recommendations after digesting doctors’ notes. IBM wants to provide “cognitive services”—computers that think, or seem to (see “Facing Doubters, IBM Expands Plans for Watson”).

Andrew Jennings, chief analytics officer for FICO, says automating human decisions is only half the story. Credit scores had another major impact. They gave lenders a new way to measure the state of their portfolios—and to adjust them by balancing riskier loan recipients with safer ones. Now, as other industries get exposed to predictive data, their approach to business strategy is changing, too. In this report, we look at one technique that’s spreading on the Web, called A/B testing. It’s a simple tactic—put up two versions of a Web page and see which one performs better (see “Seeking Edge, Websites Turn to Experiments” and “Startups Embrace a Way to Fail Fast”).

Until recently, such optimization was practiced only by the largest Internet companies. Now, nearly any website can do it. Jennings calls this phenomenon “systematic experimentation” and says it will be a feature of the smartest companies. They will have teams constantly probing the world, trying to learn its shifting rules and deciding on strategies to adapt. “Winners and losers in analytic battles will not be determined simply by which organization has access to more data or which organization has more money,” Jennings has said.

Of course, there’s danger in letting the data decide too much. In this report, Duncan Watts, a Microsoft researcher specializing in social networks, outlines an approach to decision making that avoids the dangers of gut instinct as well as the pitfalls of slavishly obeying data. In short, Watts argues, businesses need to adopt the scientific method (see “Scientific Thinking in Business”).

To do that, they have been hiring a highly trained breed of business skeptics called data scientists. These are the people who create the databases, build the models, reveal the trends, and, increasingly, author the products. And their influence is growing in business. This could be why data science has been called “the sexiest job of the 21st century.” It’s not because mathematics or spreadsheets are particularly attractive. It’s because making decisions is powerful.